Deere (DE) and CAT stock lead this weekend’s watch list of industrial stocks holding strong amid recent market volatility. Along with DE stock and Caterpillar (CAT), Ingersoll-Rand (IR), Crane (CR) and Ashland Global (ASH) are near a buy point and worth a closer look.
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These global growth plays with relatively down-to-earth valuations are outshining pricier growth stocks in a rising interest-rate environment. The improved growth outlook in China and signs the omicron wave could ebb almost as quickly as it crested could lead to the first stretch of synchronized global growth in four years, economists are beginning to think.
After a robust earnings recovery last year, all five of these industrial plays are expected to report double-digit EPS growth in 2022.
The stock market has seen a bumpy start to the year as the Federal Reserve ratchets up plans for rate hikes and a shift from buying bonds to unloading them. Still, it’s been a lot less bumpy for the Dow Jones industrial average, off a slim 1.2%, and the S&P 500, down 2.2%, than the Nasdaq composite, which has lost 4.8%.
Yet CAT stock, a Dow component, and Deere have gotten off to stellar starts, both up more than 10%. That disparate performance suggests rising conviction among institutional investors that worries over inflation and Fed tightening will persist.
Among the watch list stock, CAT, DE, IR and CR all have at least 90 IBD Composite Ratings, a single rating combining both technical and fundamental factors.
Be sure to read IBD’s daily afternoon The Big Picture column to get the latest on the prevailing stock market trend and what it means for your trading decisions.
CAT Stock
Prospects for improved growth in China, a key market for Caterpillar, informed Bernstein analyst Chad Dillard’s Dec. 22 upgrade of CAT stock to outperform from market perform with a 240 price target. He also noted that a 10% decline in steel prices amid supply increases could provide a tailwind for profit margins.
Restocking of depleted wholesale inventories and the ramp of infrastructure spending later in 2022 into 2023 further support prospects for sustained growth.
Analysts expect Caterpillar earnings will jump 59% for all of 2021, followed by 19% growth in 2022.
CAT stock has been carving out a 32-week cup pattern since peaking early in June. But after several months below its 200-day average, CAT stock shot higher, clearing the key technical level on Jan. 4.
Aggressive investors might have used that break higher as an early entry point. And while Caterpillar has built on that gain, it’s still within 5% of the 200-day line, hardly extended.
The recent gains have come on high volume, another positive sign.
CAT stock remains about 7% below a 246.79 buy point from the cup base, according to a MarketSmith analysis.
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DE Stock
Deere stock has been moving sideways since peaking in early May, having weathered a labor strike and supply-chain…
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